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April 2010

FDI — Reinvestment of internal accruals in down stream sectors

By Raman Jokhakar
Tarunkumar G. Singhal
Chartered Accountants
Reading Time 1 mins

New Page 3

The Government has decided
to allow Indian arms of foreign firms to use internal accruals for reinvestment
in downstream sectors, provided they are reckoned as debt and comply with
relevant external commercial borrowing (‘ECB’) norms. The new regime would let
these firms, owned or controlled by foreign companies, to bring in additional
capital without breaching the foreign direct investment (‘FDI’) caps, as the
reinvested funds are not treated as equity capital. The move would ease the cash
flow of foreign companies present in India and enable them to compete with local
firms on a level-playing field.



(Source : The Financial Express, dated 27-1-2010)

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